2. Value creation

Flashcards covering value creation, competitive advantage, business strategies, and the business environment.

What is the traditional concept of a business objective?

Benefit maximization

What are the limitations of the traditional concept of profit maximization?

The term profit is difficult to define and quantify, it does not account for the risk associated with achieving profits, and the concept of maximization.

Why is it important to consider management and objectives?

To avoid conflict of interests and align management and shareholder objectives.

According to the lecture, who are the stakeholders in a business?

Management, shareholders, banks & other financial agents, customers, suppliers, state, and employees/labor unions.

How is a business objective defined considering the role of stakeholders?

The one that satisfies the group with higher bargaining power, taking into account the objectives of the rest of the groups and the survival of the enterprise.

What is a unified vision for a company?

Survival, profit, and growth.

What is the definition of strategy according to the lecture?

A plan, method, or series of actions designed to achieve a specific goal or effect.

What are the two main types of strategic decisions?

Corporate strategy and Competitive or Business Strategy

What makes a successful strategy?

Long-term, simple and agreed objectives; profound understanding of the competitive environment; objective appraisal of resources; and effective implementation.

What factors encompass the generic environment?

Economic, political-legal, socio-cultural, and technological factors.

What factors encompass the specific environment?

Substitutes, relationship with suppliers, and relationship with customers.

What are Porter's Five Competitive Forces?

Rivalry among existing firms, bargaining power of suppliers, bargaining power of buyers, threat of new entrants, and threat of substitutes.

Business Strategy addresses which question?

How should we compete?

Corporate Strategy addresses which question?

Where should we compete, i.e., the scope of its activities?

What are the dimensions of scope in corporate strategy?

Geographical scope, vertical scope, and product scope.

What are the two sources of competitive advantage?

Similar product at a lower cost or price premium from a unique product.

What are the drivers of cost advantage?

Economies of learning, economies of scale, production techniques, product design, input costs, capacity utilization, and residual efficiency.

What is Differentiation in business strategy?

Is concerned with how a firm distinguishes its offerings from those of its competitors.

How did M. Porter define Differentiation?

Providing something unique that is valuable to the buyer beyond simply offering a low price.

What are the two main types of differentiation?

Tangible and intangible differentiation.

What are the reasons for diversification?

Growth, risk reduction, and profit increase.

What are the two main types of diversification strategies?

Related diversification and unrelated diversification.

What are the different diversification forms?

Vertical integration, horizontal diversification, and geographical diversification.

What are the advantages of vertical integration?

Improved inputs/outputs control, reduction in transaction costs, and more independency

What are the disadvantages of vertical integration?

Increased risk, decreased flexibility, and loss of specialization advantages.

What are the primary activities in Porter's Value Chain?

Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, and Service.

What are the secondary activities in Porter's Value Chain?

Procurement, Human Resource Management, Technological Development, and Infrastructure.